Why would someone sell their life insurance policy?
Asked by: Amanda Lynch | Last update: January 12, 2026Score: 4.2/5 (2 votes)
Why would anyone want to sell their life insurance policy?
No more premiums: Not only will you receive money for selling your policy, you'll save cash by no longer making monthly premium payments. Less stress, more options: You may improve your quality of life during your retirement years by having additional revenue from the life insurance sale.
What does someone who sells life insurance do?
Life insurance agents make a living selling insurance policies, either to individuals or businesses. They are generally paid in commissions and must find customer leads on their own. Being successful in this type of career takes time and perseverance.
What happens when a life insurance policy is sold?
A life settlement is the sale of a life insurance policy to a third party called a life settlement provider. The owner of the life insurance policy sells the policy to the life settlement provider and receives an immediate payment in return.
Why would someone cash out their life insurance policy?
If your aging loved ones need help covering retirement living expenses, health care expenses, or long-term care costs, then it may be smarter to cash out their life insurance policy rather than continue paying premiums.
Heated Debate Between Whole Life Agent and Dave Ramsey
How much do you get for selling a life insurance policy?
While the amount you will receive from selling your life insurance will vary depending on a few factors, including your specific policy and its amount, a general rule of thumb is that most people receive 40-70% of the policy's face value through their viatical settlement.
What is the cash value of a $10,000 whole life insurance policy?
Most whole life insurance policies mature at 121 years, although some mature at 100 years. Say, for example, that you purchase an insurance policy with a face value of $10,000. Once the policy matures, the cash value of the policy should equal $10,000.
Who qualifies to sell their life insurance policy?
Own a policy with a $100,000 or more in death benefit – anything less than that typically does not qualify, unless there are considerable health impairments. Life insurance policies generally qualify if you are over age 70.
Do I have to pay taxes if I sell my life insurance policy?
The portion of the sale amount you receive that is equal to what you've paid in premiums (your “cost basis”) will not be taxed. The portion that exceeds your cost basis, but is less than the cash value of the policy, is subject to income tax. Lastly, any amount above the cash value is subject to capital tax gains.
Is an old life insurance policy worth anything?
A policy that lapsed before the policyholder died has no value. But if the policy was still in force when the insured died, that policy's death benefit may still be available to the beneficiary. Note that the death benefit amount could be different from the policy's original face value. Several factors can cause this.
Is it illegal to sell life insurance?
Most types of life insurance that an individual purchases directly can be sold once they are no longer needed. Term, whole life, and universal policies can all be sold on the secondary market. However, you will likely not be able to sell any life insurance policy provided by your employer or issued by the government.
What do you call someone who sells life insurance?
Agents—also called Producers—sell policies on behalf of insurance companies. There are two types: Captive agents represent a single insurance company—State Farm, for example. The company provides training and support, and the agent agrees to sell exclusively on their behalf.
Is a beneficiary a person sells life insurance?
A life insurance beneficiary is the person or entity you designate to receive your policy's death benefit when you pass away. You can choose to have one or multiple beneficiaries, and they can be family members, charitable organizations, legal entities — it's your decision.
Is it better to surrender or sell a life insurance policy?
Selling a whole life insurance policy in a life settlement is a strategy to get far greater returns than a surrender. On average,every $100,000 in life insurance policy value will only gain back $460 in surrender value. This means even a $1 million whole life policy will be surrendered for around $4,600 in cash.
At what age can you sell your life insurance policy without?
Yes, but only in very specific cases. Selling an unwanted or unneeded policy without meeting the age-65 threshold usually means pursuing a viatical settlement. This option is only for terminally-ill individuals with a life expectancy of two years or less.
Are life settlements worth it?
A life settlement might make sense for you if you no longer want or need your current policy—or if you can no longer afford the premiums and are willing to give up or replace the coverage. Even then, however, proceed with caution. Here are some key factors to consider: Ongoing Life Insurance Needs.
How much can I get if I sell my life insurance policy?
A policyholder could receive anywhere between 10% to 35% of the amount that would be paid when they die. On average, policyholders receive an upfront cash settlement that equals 20% of their life insurance policy death benefit.
What disqualifies life insurance payout?
Life insurance proceeds can be denied. Some denials are legitimate, like in case of policy lapses, material misrepresentations, or exclusions in the form of illegal activities or war. In other cases, bad-faith insurers use elaborate methods to reject claims so they do not have to pay the proceeds.
Does cashing out life insurance count as income?
Cashing out your policy
You're able to withdraw up to the amount of the total premiums you've paid into the policy without paying taxes. But if you withdraw on any gains, such as dividends, you can expect them to be taxed as ordinary income.
What is the cash value of a $100,000 life insurance policy?
A typical life settlement is worth around 20% of your policy value, but can range from 10-25%. So for a 100,000 dollar policy, you would be looking at anywhere from 10,000 to 25,000 dollars.
Is it worth it to sell your life insurance policy?
If you no longer need your life insurance policy, it could be a good idea to sell it for a profit. This is especially true for those who need a large sum of money right away or who are having a hard time paying the premiums.
How do people who sell life insurance make money?
Typically, a life insurance agent receives anywhere from 30% to 90% of the amount paid for a policy (also known as the premium) by the client in the first year. In later years, the agent may receive anywhere from 3% to 10% of each year's premium, also known as "renewals" or "trailing commissions."
Can a nursing home take your life insurance?
Nursing homes can't take a senior's life insurance benefits away from designated family beneficiaries to cover outstanding costs. However, nursing homes can accept payments from the resulting funds of a sold or surrendered policy.
Can I cancel my life insurance policy and get my money back?
Unless you're canceling a policy during a free-look period, your premium won't be refunded if you cancel your life insurance policy. There are a few instances where you may see some money returned. For example, you may receive your accumulated cash value if you cancel a permanent policy, minus any taxes and fees.
When should you cash out a whole life insurance policy?
Many advisors generally recommend waiting at least 10 to 15 years to cash out your whole life insurance policy.